NO FURTHER PAYOUT

Waikato Times, Volume 124, Issue 20739, 24 February 1939, Page 9

NO FURTHER PAYOUT

GUARANTEE FOR CHEESE

DECISION OF MINISTER FULL EXPLANATION OFFERED (Times Special Reporter; MORRINSVILLE, Thursday. “ After careful consideration of the facts I consider that tho Government would not be justified in making a further payment for butterfat for cheese manufacture for the 1937-33 season,” said the Minister of Marketing, the Hon. W. Nash, in a statement in connection with the price differential for cheese over butter, which was released by Mr W. E. Hale, chairman of the Da’ry Board, at a conference of the No. 1 Ward of the Dairy Board in Morrinsville today.

Asked in Wellington by Mr Hale if I lie further payment procedure for the 1930-37 season would he repealed in respect of tile 1937-38 season, the

Minister replied that the circumstances relating to the cliese pay-out for the 1937-38 season were different from those of the 1936-37 season arid that, therefore, no additional payment for Ihe 1937-38 season’s cheese would be made. “You will recall,” said Mr Nash, “that the origin of the lid differential decided upon in the first year of the guaranteed price in 1936-37, was the desire of Hie Government to maintain the output of cheese relatively to that of butter. Price Fixed to Give More To this end the rates of payment under the guaranteed prices system for cheese and butter, explained Mr Nash, were fixed on a basis designed to enable an averagely efficient butter company to pay its suppliers a certain price a pound for butterfat, a standard average over-run and standard average factory costs, f.o.b. being accepted for the purpose of calculation. Further it was designed to enable an averagely efficient cheese company to pay its suppliers for butterfat a price lid a pound higher than that which had been estimated would be paid by an averagely efficient butter company, a standard average cheese yield, a standard average return from whey butter and standard average factory costs, f.o.b. again being accepted for the purpose of calculation. “The guaranteed price for cheese for the 1936-37 season,” said Mr Nash, “was estimated to give a butterfat pay-out of 14.5'id a pound, and it, was based on cheese factory costs at. 2.75 d a pound butterfat.” Mr Nash then outlined the terms of the announcement of the price for cheese as made in the 1936 Budget. Costs More Than Anticipated It was found in the 1936-37 season that actual cheese factory costs were 3.139 d a pound of butterfat, or .389 d a pound in excess of the costs allowed for in the guaranteed price. The Government, as a result, made a further payment for cheese of id a pound. “The further payment was intended,” added Mr Nash, “to enable t-he companies to pay at least Hd a pound butterfat in excess of the pay-out of butter manufacturing companies.” In the 1937-38 season the allowance for cheese factory costs was increased to 3.25 d per lb butterfat. The cheese factory payment was expected to be 15.88 d a pound butterfat and that figure was raised by a further payment io 16.35 d. “The results of the 1937-38 season show that the average cheese pay-out realised was 16.35.9rl or .009 d in excess of the pay-out expected to be realised, and also that the average cheese factory costs were 3.337 d or .087 d in excess of the costs allowed for, which slight disparity was more than offset by the excess whey butter returns over the allowance for whey butter.” A Poorer Season “For the 1937-38 season the average butter pay-out was 14.812 d and the average cheese pay-out was 16.389 d. The average cheese pay-out thus failed to show the margin of 2d by .423 d." he said, adding that had cheese, factories obtained the same rate of cheese yield and the same standard of grading as for the previous season, the average differential for cheese

over butter in 1937-38 would have been 2d.

“It is obvious when over-runs, cheese yields and factory costs are estimated before the commencement of a season, and when climatic conditions may affect grading quality and premiums to an unknown degree, that it is impossible to fix prices for butter and cheese that will show in every season a differential cheese butterfat pay-out of exactly 2d above the pay-out for butter. Favourable Margin Shown “The Government decided that 14.38 d was a just and sufficient price for blitter and that 16.38 d was a just and sufficient pay-out for cheese for the i 937-38 season. The butter companies paid out .4 32d more than the 14.38(1 and the cheese companies paid out .009 d more than the 16.38 d. Both the butter companies and the cheese companies showed favourable margins in respect of the respective estimated combined over-run, yield and costs, but the butter companies showed a margin of ,423 d greater than that of the cheese companies. I concede that, if the actual costs of cheese companies had exceeded the estimate costs, there might have been justification for an increased payment equivalent to the excess, but this is not the case.

“The cheese companies have received a price which has enabled them to pay slightly more than the 2d differential above the estimated butterfat payment calculated for the butter companies, and the failure to realise a differential of 2d above the actual butterfat payment for butter is due to a lower cheese yield and lower grading than the previous season. These two factors are beyond the control of the Government.” Decision to Request Again * “In spite, of what the Minister says,” remarked Mr >. A. Ferguson, chairman of tho South Auckland Dairy Association. “1 am going to move that the remit to go forward to ihe Dominion conference in April, asking ihe Government lo make up the difference between butter and cheese for the 193738 season to 2d a lb butterfat as promised. be carried. If we allow ITi •* Government to get away with it th • year we will find ourselves in the same position .every year.” "I still think we- should press for the 2d which was promised us.” said Mr NY. N. Perry, chairman of the Bruntwood Dairy Company. “AH the increased costs accruing from bigger wages and shorter hours and so forth have not been taken into consideration by the Minister. “There is no room for all the cheese people in t.he butter industry, and for tha* reason I think the suppliers to butter factories should support our request, for if appears that butter will be difficult to sell even without extra producers.” added .Mr Perry. The remit was approved.